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This article analyses the experience of the Spanish government in achieving financial equilibrium between 1998 and 2003 and the institutional mechanisms for maintaining budget stability. Spain has a high degree of fiscal decentralisation; thus compliance with the budget discipline requirements of the European Stability and Growth Pact is somewhat complex. To ensure that all levels of government contribute to fulfilling Spain’s commitments under the SGP, budget stability legislation was passed in 2001. Main features are the prominent role of the central government in setting objectives and the responsibility of all levels of administration for those objectives. Though the public sector deficit has been significantly reduced in the period under study, some reforms to the legislation are currently being envisaged.